A Financial Checklist After Divorce

Divorce changes accounts, taxes, insurance, and cash flow. Work through the documents and deadlines in a manageable order.

By CreditCardDebt Staff3 min read

Illustrated financial checklist beside separated account folders and a calendar

Once the decree is signed, the paperwork shifts from lawyers to banks, employers and the IRS. Work through it in roughly this order: untangle shared debts first, then health coverage and taxes, then retirement accounts and beneficiaries, then a new budget. Keep several copies of the decree handy, because almost every institution will ask for one.

Shared debts and accounts

Make a list of everything with both names on it: checking and savings, credit cards, the mortgage, car loans, utilities, the lease, streaming and phone plans.

The decree may say your ex pays the joint card, but the card issuer didn’t sign your divorce agreement. As far as the lender is concerned, both of you are still responsible for a joint account until it’s paid off, refinanced, or closed. If your ex misses payments, the late marks land on your credit report too.

For each joint account, decide with the lender whether to close it, refinance it into one name, or pay it off. Ask that joint cards be closed to new charges right away, even if a balance remains. If you were an authorized user on your ex’s card, or they were on yours, remove that access.

Then:

change passwords, PINs, and security questions on accounts you keep
reroute direct deposits and automatic payments
pull your credit reports and look for joint accounts you forgot about; How to Check Your Credit Score for Free explains how
consider a credit freeze if you’re worried about new accounts being opened in your name

Health insurance

If you were covered through your ex-spouse’s employer plan, you can usually keep that coverage through COBRA for up to 36 months after the divorce is final. You (or your ex) have to notify the plan, usually within 60 days, so don’t assume HR will handle it. COBRA is often expensive because you pay the full premium, so compare it with coverage through your own job or a Marketplace plan; losing coverage typically opens a special enrollment window.

Taxes

Your filing status depends on your marital status on December 31. If the divorce is final by then, you can’t file jointly for that year. Depending on your situation, you’ll file as single or head of household.

Update your W-4 with your employer, since your withholding was likely set for a married household. Settle with your ex who claims each child, and note that alimony under divorce agreements made after 2018 is neither deductible by the payer nor taxable to the recipient. Property you receive in the divorce generally isn’t taxed at the time of transfer, but you inherit the original cost basis, which matters when you sell.

Retirement accounts and beneficiaries

Splitting a 401(k) or pension usually requires a qualified domestic relations order (QDRO), a separate court order the plan administrator must approve. The decree alone often isn’t enough. Done correctly, a QDRO lets the money move without the early-withdrawal penalty that would apply if you just cashed out.

Then update beneficiaries on your retirement accounts, life insurance, and any payable-on-death bank accounts. A beneficiary form usually overrides your will, so an outdated one can send money to an ex-spouse.

If your marriage lasted at least 10 years, you’re unmarried, and you’re 62 or older, you may be able to collect Social Security based on your ex-spouse’s record. It doesn’t reduce their benefit. Retirement Planning Essentials covers the bigger picture.

A new monthly budget

Build it from scratch rather than adjusting the old one. Housing, insurance and child-related costs often change more than people expect. Count support payments, paid or received, and don’t spend a lump-sum settlement until you know what taxes, legal fees and moving costs will take from it. Creating a Personalized Budget has a starting framework.

For anything involving property, retirement splits or support, a local attorney or tax professional is worth the cost. State law can change the answer.

Sources

This article is for educational purposes and is not financial advice.